Merryn's Blog

Women don’t outperform men – excellent women outperform average men

The few women who make it in the boorish world of hedge funds are extremely smart, hard working and ambitious, says Merryn Somerset Webb. That gives them an advantage over the average hedge fund manager, who is merely mediocre.


Hedge funds run by women do better than those run by men. That's a dead cert. Or so says Stephen Foley in the FT.

Those that women own or run have "beaten the industry average on a one year three year and five year view." Go back to 2007 and it looks even better: they have returned 59% against an average of 37%. There's no arguing with the numbers.

Subscribe to MoneyWeek

Become a smarter, better informed investor with MoneyWeek.

The question, then, is why do women do better? Foley has the answer to that too: women are better risk managers, "less prone to wild gambles, much less likely to trade in and out of positions in response to market volatility, and generally more likely to take a long-term view".

To Foley, that means that if we want to see the hedge fund sector doing better than it is at the moment (this isn't much to ask, by the way the sector's performance is beyond pathetic) it needs to hire more women quickly, and preferably by institutional investor mandates. "If more of the $2.7trn in hedge fund assets were institutionally earmarked for female managers, the industry would quickly find a way to meet the demand" and the result could be that it is pulled out of its underperformance funk.

Advertisement - Article continues below

This is all possible, I suppose. But it is more likely to be complete nonsense.

There are sensible arguments to be made for diversity (I'll come back to this another day). But there is a very good reason the women running hedge funds are better than the men. The hedge fund industry is a Mayfair man's world. It's all about longish hours, trading, boasting and being available for markets and clients non-stop. Setting up on your own is also pretty tough and very risky.

Not many women fancy that (or the sexism that often joins it) so they don't bother to get into it or get to the top of it. There are plenty of other highly paid careers around. Some do bother, though the ones who really love it and who are exceptionally good at it; the ones who are super tough and able; the ones who perform so well that they can't be gender stereotyped out of the business.

But the thing is that these women aren't excellent hedge fund managers because they are women. They are excellent fund managers because they are the very best, the very smartest and very much the most ambitious women in the industry.

Women don't outperform men. Excellent women outperform merely good men.




The power of mean reversion

When it comes to investing in funds, don’t chase the top performers – look for the cheapest ones.
1 Apr 2019

The most important number to look at before you buy any fund

Many investors get distracted by past performance when they buy a fund. But there’s something else to consider that will have a much bigger influence …
22 Mar 2019

Why investment trusts are the best vehicle for your money

Max King explains the advantages of investment trusts – sometimes called closed-ended funds – over their open-ended counterparts (or Oeics).
11 Feb 2020
Share tips

Asian income stocks: where to find the continent's top money machines

International dividends shouldn’t only mean companies in the US or Europe – the Far East has plenty of big payouts to offer. Cris Sholto Heaton looks …
6 Feb 2020

Most Popular

House prices

The biggest risk facing the UK housing market right now

For house prices to stagnate or even fall would be healthy for the property market, says John Stepek. But there is a distinct danger that isn't going …
17 Feb 2020
UK Economy

How the BBC can survive the end of the TV licence

The TV licence that funds the BBC is looking way past its sell-by date, says Matthew Lynn. Here's how it could survive without it
16 Feb 2020

Money Minute Monday 17 February: good news ahead for the UK economy?

Today's Money Minute looks to a week in which we get the latest employment and inflation numbers, plus retail figures for January and a slew of eurozo…
17 Feb 2020

Is 2020 the year for European small-cap stocks?

SPONSORED CONTENT - Ollie Beckett, manager of the TR European Growth Trust, on why he believes European small-cap stocks are performing well.
12 Feb 2019